(Bloomberg) -- Hong Kong saw sales of commercial real estate and residential buildings fall to a 19-year low in the second quarter as high interest rates took a toll on investment property transactions.

The city recorded just HK$2.7 billion ($345 million) of deals in the period, Colliers International Group Inc. said in a report on Wednesday. The weak performance was largely due to a lack of transactions in office and industrial properties, according to Thomas Chak, co-head of capital markets & investment services at Colliers.

“Investors are expected to remain prudent in the coming months, affected by the sluggish mainland Chinese economy and anticipated further rate hike by the US Federal Reserve in the second half,” Chak said.

Read more on Hong Kong’s emptying skyscrapers

The office sector remains under pressure with a vacancy rate of about 15% city-wide. Rents fell 2% in the first six months even after the border reopened at the beginning of the year, data from Colliers show. 

Generally, demand for industrial real estate including warehouses is more resilient than offices. But high interest rates have deterred investors in recent months as the rental yield struggles to keep up with borrowing costs, according to Chak.

The firm forecasts total investment to decline by 50% in 2023 to HK$35 billion, with values of both offices and industrial real estate expected to fall.

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